N G O F I N A N C I N G
Environmental nongovernmental organizations (NGOs) in Central and Eastern Europe (CEE) have become increasingly present in nearly all stages of environmental conservation, management and policymaking. Although a welcome opportunity for many, this presents a tremendous challenge for both NGOs and their advocates to prove their legitimacy and illustrate their capacity to effectively manage and sustain their activities. Building truly "sustainable" NGOs is a multi-dimensional challenge entailing both internal factors of developing and strengthening organizational capacity, as well as external factors of establishing a more secure and supportive resource and regulatory environment for NGO initiative.But while ensuring institutional sustainability requires far more than simply ensuring financial sustainability, the question of how to generate a stable source of financing is indeed one of the most universally recurrent and confounding obstacles for NGO professionals, fund-raisers and policy analysts in the region. Results in REC's recent report, Problems, Progress and Possibilities: A Needs Assessment of Environmental NGOs in Central and Eastern Europe, provides some insight into this dilemma for CEE environmental NGOs: of the 3,000 NGOs polled, nearly three quarters (73 percent) assessed their financial status as either poor, very poor or unstable. Many NGOs in CEE remain heavily dependent on the external financial assistance of foreign, primarily Western, nations. According to RECÕs research, support provided by international donors accounts for the largest source of NGO funding in the region when compared with support from national private donations, membership dues, governmental grants and fees for services.
However, some foreign governments and private funding institutions have begun to reduce, or altogether eliminate, their foreign assistance to the CEE region, most particularly in the four Visegrad countries (Czech Republic, Hungary, Poland, and Slovakia) and Slovenia. Resources for NGOs have not been as forthcoming as had originally been anticipated in these countries as donors shift attention to other priorities and other more needy, politically expedient or publicly popular regions of the world.
Furthermore, many of those donor resources from abroad that do find their way to NGOs in the region are available only with very strict restrictions. Donors often attach very specific limitations on how moneys can be spent either on particular issues or restricted only to programmatic expenses, leaving little opportunity for NGOs to find adequate support for their ongoing and operational expenses beyond the defined project-cycle. NGOs are still forced to "go where the money is" regardless of whether the project priorities identified by a prospective funder suit the long-term strategic plans of their organization. This approach has led NGOs into an endless cycle of resource dependency whereby they remain purely consumers of resources rather than generators of additional resources. The current donor enthusiasm for project-based funding puts the focus on the activities of NGOs rather than on sustaining the organizations themselves. Institutional or organizational development remains a lower priority in practice.
Meanwhile, the local sources of funding for the NGO sector in most CEE countries, whether from local or national agencies, private sources or public donations, have not yet developed to a level sufficient enough to meet demand. And while the development of a local philanthropic base for NGO initiative may represent the most long-term and preferable solution to NGO financing problems, this is a process which will take years of cultural, social and economic change to develop.
Environmental NGOs in CEE have typically not utilized the self-financing approach to resource-generation. Of the 3,000 environmental NGOs surveyed in REC's needs assessment, 56 percent indicated having received no resources from fees for services, 67 percent no resources from fees for training, and 73 percent no resources from fees for publishing. In addition, 66 percent indicated having received either less than five percent or none of their resources from membership dues.
NGOs must take stock of opportunities to offer or contract out their professional expertise and services to public and private "clients." There currently exist many such untapped opportunities to develop NGO professional capacity and to create alternative revenue-generating opportunities. RECÕs recent local market surveys in the four Visegrad countries indicate that despite significant constraints on available funding, small environmental businesses that position themselves well could take advantage of substantial growth opportunities in coming years as governments are stabilizing, market-oriented institutions are emerging and local business activity is rapidly increasing and gaining exposure to the West. Demand for goods, services and technologies in environmental protection from pollution control technology manufacturers, testing laboratories, waste transporters and environmental consulting is growing steadily in the region.
However, numerous creative and potential lucrative cases of environmental NGO "eco-enterprises" do exist in the region. Ekocenter, a coordinating body for environmental NGOs in Yugoslavia, is expanding its commercial side using publishing and even an organic wine project to generate income. The Ecobaltic Foundation in Gdansk, Poland, supports a portion of its environmental programs through its own business activities. The Czech Cleaner Production Center (CCPC) in Prague and the Environmental Management Training Center in Warsaw use innovative cost-recovery approaches for their training courses. Organizations like the Galgafarm in Hungary and the Society for the Improvement of the Quality of Life (SIQL) in Croatia are capitalizing on organically-grown agricultural products, generating a portion of their funds from the sales of organic foods from their own farms, in their own shops or through their own restaurants. An environmental NGO, Adonis, in Mikulov, Czech Republic, started a very successful soft tourism tourist office which is trying to get eco-tourists to the region. Environmental NGOs have also ventured into non-environmental ventures, like the Lotus Foundation in Czech Republic which has succeeded in generating about a third of its annual operating budget through its desktop publishing services for NGO and for-profit clients.
Internally, there are some deep philosophical and practical obstacles that exist for NGO eco-enterprises. First, accepting private-sector, market-oriented approaches to generating NGO resources may seem unethical to some, if not the veritable antithesis of NGO and environmental values. Second, although many staff of NGOs are skilled in particular vocational or social service areas, most lack the necessary business and financial management skills necessary to effectively manage eco-enterprises. Third, NGOs often overestimate their capacity to assess and effectively allocate their internal resource capacities - both financial and human - to undertake eco-enterprises. Fourth, determining the most effective structure for management and accountability of eco-enterprises is critical.
Externally, access to the necessary financial capital to launch or expand eco-enterprises is a significant obstacle. Because of their nonprofit or voluntary legal form, NGOs are often denied access to traditional small business loan funds from private banks or other lending agencies. Using internally generated funds, donor funds, donations from staff, members, boards, or friends or in-kind donations are often the only available alternatives.
| SUPPORTING NGO ECO-ENTERPRISE |
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The Sustainable NGO Financing Project (SNFP)The SNFP is a cooperative effort of the REC and the Nonprofit Enterprise and Self-sustainability Team (NESsT) to encourage and assist environmental NGOs in CEE to identify the long-term, financial resources necessary to ensure the on-going sustainability of their programmatic activities. The SNFP will initially focus on the Czech Republic, Hungary, Poland, Slovakia and Slovenia, investigating the level and type of self-financing mechanisms utilized by NGOs, obstacles to implementing such approaches, and the current regulatory environment (legal, tax and fiscal instruments employed by regional authorities) for eco-enterprise. REC and NESsT will also work closely with a small group of environmental NGOs from each country to launch new or expand existing eco-enterprises. The project will evaluate the effectiveness of these self-financing approaches and outline a set of policy and program recommendations for NGOs and policymakers to foster such initiatives. Meanwhile, the REC and NESsT will work to widely disseminate the SNFP findings in an effort to increase regional awareness of the importance of alternative, NGO self-financing mechanisms. |
A truly sustainable NGO financing strategy consists of diversifying sources of income to avoid dependency on any single source of revenue, whether external or internal. A rule of thumb is that NGOs raise sufficient funds from internal sources to cover their basic operating costs but approach external funders for their program costs.
For those NGOs which do implement self-financing activities, a considerable dedication of human and financial resources which is sometimes beyond the capacity of NGOs is required. But as with any other resource-generation technique, it is a question of weighing the costs and benefits within given circumstances. Through eco-enterprises, some NGOs considerably reduce or completely eliminate their dependency on donor funds, are able to expand their programmatic activities exponentially, provide security for permanent or professional staff salaries, establish endowment funds and provide opportunities and support to their constituents. However, some NGOs may lose staff members and volunteers, invest (or lose) large quantities of money and time, become overwhelmed by logistics and management issues and grow increasingly distracted from their original mission.
Supporting NGO eco-enterprise calls for nothing less than a fundamental re-evaluation of the traditional relationship between donors and donees, nonprofit and for-profit institutions and Western and Eastern NGOs. While self-financing does provide some opportunities for greater financial autonomy and organizational independence, it is by no means a panacea. The opportunities for NGO self-financing deserve and require far greater systematic attention from environmental practitioners, policymakers and researchers to determine the most effective ways to both stimulate and nurture the contributions of this resource-generation model to overall NGO sustainability.
Contact: Lee Davis, NESsT, 3104 Grindon Avenue, Baltimore, MD 21214 USA,
Tel/Fax: (1-410) 426-3671,
E-mail: nesst@igc.apc.org,
Internet: http://www.nesst.org